Press release

Tue, Jun 25th 2013 08:30 am

Bill
will help prevent New York homeowners from getting trapped in the
growing "shadow docket" of frozen foreclosure cases

Attorney
General Eric T. Schneiderman announced that the New York State
Legislature has passed the "Certificate of Merit" bill (A.
5582/S.4530A), which will help more New York families avoid
foreclosure. The bill enacts common sense reforms to bring greater
integrity to the foreclosure process and expedite homeowners'
participation in court-supervised mediation sessions where they can
negotiate workable alternatives to foreclosure with their lender.

This
joint program bill was proposed by the office of the attorney general
and the office of court administration. It was sponsored in the
Assembly by Judiciary Committee Chair Helene Weinstein, and in the
Senate by Senate Co-Leader and Independent Democratic Conference
Leader Jeff Klein. The bill passed by a vote of
51 to 12
in the Senate. It was passed in the Assembly on May 22 by a vote of
111 to 26.

"By
passing this critical legislation, the Legislature has taken a strong
stand on the side of hard working New York families who are fighting
to keep their homes but can't get a fair shake from mortgage
providers,"Schneiderman
said. "The 'Certificate of Merit' bill will give countless
homeowners a fighting chance to save their homes. Instead of being
trapped in the growing 'shadow docket' of essentially frozen
foreclosure cases, homeowners will be able to schedule mandatory
court settlement conference promptly, and negotiate to keep their
homes."

The
legislative was top priority for Schneiderman, who has been a staunch
advocate for homeowners who bore the brunt of the financial crisis
caused by the collapse of the housing bubble. Many homeowners in New
York are still fighting to stay in their homes, and the certificate
of merit bill will ensure that, when a family gets a foreclosure
notice, they will be able to schedule a settlement conference
promptly, before they sink deeper in to debt.

Homeowners'
foreclosure cases regularly languish for months - and often years -
when mortgage lenders delay in filing critical paperwork that affirms
the basis for the foreclosing bank's right to foreclose on the
property and ultimately triggers a settlement conference - the
mandatory process under New York law that provides borrowers and
their financial institutions an opportunity to mutually negotiate
alternatives to foreclosure, such as loan modifications or short
sales.

The
delays and subsequent backlogs, often referred to as the "shadow
docket," have become a major burden on both homeowners and the
judicial system. This legislative fix will require banks to file the
necessary paperwork, which ultimately triggers the settlement
conference, simultaneously with the filing of any foreclosure action,
thus avoiding future delays. The office of court administration has
reportedly estimated that 25,000 families are trapped in this legal
foreclosure limbo.

Schneiderman
has made protecting homeowners struggling to avoid foreclosure a top
priority. In June of 2012 he announced the Homeowner Protection
Program, a three-year, $60 million initiative to fund housing
counselors and legal services across New York. The program strives to
ensure that every family facing foreclosure has access to a
knowledgeable and qualified professional advocate.

Throughout
New York, 34 legal services organizations and 59 housing counseling
agencies will receive more than $16.1 million this year to provide
free foreclosure prevention services. An additional $3.9 million has
been allocated for training, technical assistance, and other support
services to assist homeowners in foreclosure. In part because of the
advocacy of HOPP-funded housing counselors and legal services
providers, more than 4,300 New York homeowners have completed, or
have active trial modifications for approximately $540 million worth
of first mortgage principal reduction.